Insolvency and Bankruptcy Code 2016 Current Affairs - 2019

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IBBI tightens norms governing resolution professionals (RPs)

Insolvency and Bankruptcy Board of India (IBBI) has tightened norms that governs resolution professionals (RPs), wherein they would be barred from having employment when they are in possession of authorisation to take up work under insolvency law. Also, restrictions will also be in place for relatives of RPs in accepting employment after completion of resolution process. For this purpose IBBI has amended respective regulations.

IBBI (Insolvency Professionals) Regulations, 2019

With this notified regulation Insolvency and Bankruptcy Board of India amends Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.

Salient Amendments effected are:

  • An Insolvency Professional (IP) should not take up any assignment unless he/she holds an Authorisation for Assignment issued by insolvency professional agency concerned. This provision is effective from 1 January 2020. This would be applicable for an individual acting as an interim resolution professional, (or resolution professional), bankruptcy trustee, liquidator, authorised representative or in any other role under Insolvency and bankruptcy Code (IBC), 2016.
  • An Insolvency Professional (IP) should not engage in any employment when he holds an Authorisation for Assignment/when he is undertaking an assignment. Although he may surrender Authorisation for Assignment when he wishes to take up employment.
  • Resolution professional, and his or her relatives, cannot accept any employment (other than an employment secured through open competitive recruitment) from successful resolution applicant concerned for one year.
  • Insolvency professional shall not appoint any of his relatives or related parties, in connection with any work relating to any of his assignment.

IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2019

Salient Amendments effected are:

  • An insolvency professional agency shall issue or renew an Authorisation for Assignment to insolvency professionals in accordance with its Bye-Laws.
  • An individual would be permitted to serve as an independent director on governing board of an insolvency professional agency up to age of 75 years.

About Insolvency and Bankruptcy Board of India (IBBI)

It was formed on 1 October 2016. It was given statutory powers under Insolvency and Bankruptcy Code (IBC), 2016.

It regulates and counters various bad loan cases reported by various creditors, which especially involved banks in India.

It also regulates profession and processes related to insolvency and bankruptcy.

It plays the role of governing body for all Insolvency Resolution Professionals (IRP), Insolvency Professional Agencies (IPA) and Information Utilities (IU).

Wilful Defaulters in Nationalised Banks up by 60% in 5 years: Govt

As per a written reply given by Union Finance Minister Smt. Nirmala Sitharaman in Lok Sabha, the number of wilful defaulters in nationalised banks has increased by more than 60% to 8,582 in five years to March 2019.

Key Highlights

The Finance Minister provided the written reply in Lok Sabha to a question asked that whether the cases of willful defaulters of banks have increased during the past five years.

Wilful Defaulter is an entity or a person that has not paid the loan taken back to the bank despite having the ability to repay it. Wilful defaulters are acted against comprehensively.

Data Provided by Government:

By end of fiscal year 2014-15, the figure of wilful defaulters in nationalised banks stood at 5,349, and since then the number of such borrowers has been consistently rising- with being 6,575 (2015-16), 7,079 (2016-17), 7,535 (2017-18) and now increased to 8,582 in 2018-2019 fiscal.

During the last 5 financial years about ₹7,654 crore has been recovered from wilful defaulters’ accounts.

Steps Taken By Government

As per data reported by 17 nationalised banks in India, till 31 March 2019, suits for recovery have been filed in 8,121 cases out of 8,582.

SARFAESI Act: In cases involving secured assets, action under provisions of SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002) has been initiated in 6,251 cases.

RBI Instructions: As per the instructions provided by Reserve Bank of India (RBI), wilful defaulters are not sanctioned any additional facilities by banks/financial institutions, their unit is debarred from floating new ventures for 5 year and even criminal proceedings are initiated wherever necessary. In accordance with this FIRs have been registered in 2,915 cases.

SEBI Regulations: Besides, vide Securities and Exchange Board of India (SEBI) regulations, wilful defaulters and companies who has with wilful defaulters as either promoters or directors have been debarred from accessing capital markets to raise funds.

IBC 2016: The Insolvency and Bankruptcy Code (IBC), 2016 has debarred wilful defaulters from participating in insolvency resolution process.

FEO Act 2018: The government has enacted Fugitive Economic Offenders Act, 2018 for effective action against wilful defaulters who flee Indian jurisdiction. It provides for attachment and confiscation of property of fugitive offenders and to disentitle them from defending any civil claim.

PSBs: Government has also advised all Public Sector Banks (PSB) to decide on publishing photographs of all concerned wilful defaulters and to obtain certified copy of passport of promoters/directors and other authorised signatories of companies availing loans of over ₹50 crore. The heads of PSBs have also been empowered to request for issuance of look out circulars (LoC) against wilful defaulters.